2016 budget: Experts say sourcing of deficit locally will rebound bond market

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Some financial experts on Monday expressed optimism that the sourcing of the N2.2 trillion deficit in the 2016 budget locally, would rebound the bond segment of the capital market.

They told the News Agency of Nigeria (NAN) in Lagos that the lofty idea showed that the Debt Management Office (DMO) would issue more bonds for the servicing of the budget.

Mr Uche Uwaleke, an Associate Professor and Head of Banking and Finance Department, Nasarawa State University, Lafia, said he foresaw much activity in the bond market in the next couple of weeks.

He predicted that the budget would increase the Purchasing Managers Index (PMI) above 50 per cent against the 43.7 per cent recorded in April.

NAN reports that the PMI is used to check the status of the nation’s manufacturing sector for a particular month.

Uwaleke said the N1.3 trillion earmarked for capital expenditure would kick-start economic activities, aid jobs creation, and ensure settlement of debt owed contractors.

He explained that the injection of the funds into the system might trigger inflationary pressure in the short-term which would fizzle out before the end of the year.

Uwaleke added that the Central Bank of Nigeria (CBN) might be forced to increase the country’s Monetary Policy Rate (MPC) in the interim due to increased activities at the parallel market.

He said this might put more pressure on the nation’s currency.

On the signing of the 2016 budget, the university don said it was good for the economy, adding that lessons must be learnt from the impasse.

“I am happy that the impasse had been settled in the interest of the country.

“The government should learn a lesson from the 2016 budget and avoid repeat of such mistake in the 2017 budget and it should be submitted latest by October 2016 for assent.”

Alhaji Rasheed Yussuf, the immediate past President, Association of Stockbroking Houses of Nigeria (ASHON), said the market had maintained an upward movement with the signing of the budget on May 6.

Yussuf said traders and investors reacted positively to the resolution of the budget impasse and that expectations of faithful implementation of the budget would revive the depressed economy.

He was also optimistic that more jobs would be created with the signing of the budget and that there would be increase in demand for goods and services due to enhanced liquidity.

“The overall effect will be that companies will make more profit, and that will lead to strong demand for their shares,” he stated.

According to him, the market is expected to continue to show a strong northward progression.

Mr Adebayo Adeleke, National Secretary, Independent Shareholders Association (PSAN), said the delayed budget had put capital expenditure on hold.

Adeleke said ministries, departments and agencies (MDAs) must accelerate the developmental agenda of the government. (NAN)

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